INDUSTRIAL-ORGANIZATIONAL PSYCHOLOGY
■ A small span of control is 2 subordinates; a
OUTLINE
I. Organizational Theories
A. Classical Theory
1. Scientific Management
2. Bureaucracy
3. Administrative Theory of Management
B. Neoclassical/Humanistic Theory
1. Theory X and Theory Y
2. Hawthorne Studies
C. Open Systems Theory
ORGANIZATIONAL THEORIES
● Organizational Theory: a set of propositions that
explains or predicts how individuals or groups
behave in varying organizational structures and
circumstances.
CLASSICAL THEORY
● A theory developed in the early 20th century that
described the form and structure of organizations.
● Four Basic Tenets
○ Organizations exist for economic reasons and
to accomplish productivity goals.
○ Scientific analysis will identify the one best way
to organize for production.
○ Specialization and the division of labor
maximize production.
○ Both people and organizations act in
accordance with rational economic principles.
● Four Structural Principles
○ Functional Principle: organizations should be
divided into units that perform similar functions.
■ Similar work activities are often organized
into departments, which enhances the
coordination of activities and permits more
effective supervision and a more rational
flow of work.
■ The functional principle relates to the
horizontal growth of the organization.
○ Scalar Principle: organizations are structured
by a chain of command that grows with
increasing levels of authority.
○ Line/Staff Functions
■ Line Functions: organizational work that
directly meets the major goals of an
organization.
■ Staff Functions: organizational work that
supports line activities.
○ Span of Control Principle: the number of
subordinates a manager is responsible for
supervising.
large span of control might be 15.
■ Large spans of control produce flat
organizations; small spans of control
produce tall organizations.
SCIENTIFIC MANAGEMENT
● In the late 1800s and early 1900s, Frederick Taylor
provided a framework that he believed would be
useful in structuring organizations.
● Scientific Management holds its premise that the
organization is a machine — a pragmatic machine
whose focus is simply to run more effectively.
● Taylorism believes that there is one best way to get
the job done.
○ Its tactics were to conduct studies that gather
data indicating what the fastest and most
efficient method is, then implement that
method.
○ Taylorism maintained that factory workers
would be much more productive if their work
was designed scientifically.
FOUR PRINCIPLES OF SCIENTIFIC MANAGEMENT
● Management gathers data from the workers, who
are in the best position to understand the job duties
and tasks.
● Workers are selected carefully and then trained so
that they become more efficient than ever before.
● Scientific selection, data collection, and training are
combined to enhance efficiency.
● The work itself is redistributed, with management
taking over tasks previously left to subordinates.
BUREAUCRACY
● Max Weber developed the notion of bureaucracy,
which, in his view, described the structure,
organization, and operation of many efficient
organizations.
FOUR MAJOR FEATURES OF A BUREAUCRACY
● Division of Labor: each job in a bureaucratic
organization is a specialized position with its own set
of responsibilities and duties.
○ This allows the organization to take advantage
of individuals’ particular strengths, thus
avoiding the problems that result from asking
people to perform tasks requiring skills they
don’t have.
● Top-Down Pyramidal Organizations
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INDUSTRIAL-ORGANIZATIONAL PSYCHOLOGY
○ According to Weber, this hierarchical system is
necessary if the division of labor is to be
beneficial.
● Delegation of Authority: an approach whereby
supervisors assign particular tasks to separate
employees and hold them responsible for
completing these tasks.
● Span of Control
○ If the span of control is too large, supervisors
are unable to manage so many subordinates; if
it is too small, there is an overabundance of
supervisors managing too few employees.
● Daniel Katz and Robert Kahn emphasize two
additional issues that are important to Weberian
Bureaucracy: standardization of tasks and
centralized decision-making.
○ Standardization of Tasks is analogous to
Frederick Taylor’s notion of the “one best way”
to get a job done, in that it pertains to the
training of employees toward that end.
○ Centralized Decision-Making is related to the
notion of chain of command; major decisions
are made by one or more individuals who are
centralized under one command.
ADMINISTRATIVE THEORY OF MANAGEMENT
● Henri Fayol, the father of the Administrative Theory
of Management, often called Process Theory or
Structural Theory.
● Administrative Theory of Management focused on
organization and structure of work tasks; looked
specifically at how management and workers are
organized within a business to allow for the
completion of tasks.
○ It is in contrast to the scientific approach to
management, which posited that worker
efficiency would lead to greater managerial
efficiency. The administrative theory of
management focused on what managers do.
● Top-down approach to organizational efficiency
was followed; and rational authority structure for
organizations was emphasized.
● Departmentalization Principle: the creation of work
groups and functional departments where distinct
activities are performed; similar tasks or functions
should be grouped within the same department or
unit.
14 PRINCIPLES OF MANAGEMENT
● Division of Labor: allows for specialization.
Individuals can become more proficient in the
accomplishment of a limited set of activities, which
improves their output.
● Authority: managers must have the authority to
issue commands, but with that authority comes the
responsibility to ensure that work gets done.
● Discipline: there must be a clear line of authority.
Subordinates must fully obey instructions from
superiors. Managers must have the ability to instill
discipline through punishment.
● Unity of Command: the concept that each
subordinate should be accountable to only one
supervisor.
● Unity of Direction: each workgroup or department is
working under a singular plan that coordinates
efforts. Work efforts should be guided by one
supervisor.
● Subordination of Individual Interest: the interests of
individuals are subordinate to the general interests
of the group or department or company.
● Remuneration: compensation is used to incentivize
worker performance. Remuneration can induce both
financial and nonfinancial forms of compensation.
● Centralization: decision-making should be either
centralized or decentralized depending upon the
characteristics of the organization and worker
competency.
● Line of Authority (Scalar Chain): a hierarchy of
authority that places workers below managers in the
reporting structure. The degree of authority is higher
at each stage of the organization hierarchy.
○ The organizational hierarchy should be
well-understood throughout.
● Order: there must be well-defined rules and
standards for the work environment and work
responsibilities.
○ A safe and orderly environment leads to greater
coordination.
● Equity: the organization must be run based on
principles of fairness. Employees should be treated
with a combination of kindness and justice.
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INDUSTRIAL-ORGANIZATIONAL PSYCHOLOGY
● Stability of Tenure: organizations need low turnover.
among work activities, it also
This allows employees time to learn their jobs,
depersonalizes these activities so
develop skills, and acquire loyalty.
that the individual finds little
● Initiative: managers must promote initiative by
meaning in them.
allowing employees to create plans and carry them
● People develop a sense of
out.
alienation from highly repetitive
● Esprit de Corps: establishing a sense of belonging
work, which ultimately results in
within the organization created a sense of unity and
dissatisfaction with their work.
morale.
● In turn, this dissatisfaction can
result in decreased efficiency
5 FUNCTIONS OF MANAGEMENT caused by lower productivity and
increased absence.
● Planning: flexible in nature to allow for contingencies
that arise in the process. Scalar This was questioned on the
●
○ Forecasting Future Conditions Principle grounds that other systems
○ Setting Objectives operate in organizations besides
○ Developing Means To Attain Objectives those imposed by formal
● Organizing: structuring activities and organizing superior-subordinate
individuals within the firm. relationships.
○ Recruiting ● Individuals are influencers by
○ Equipping interpersonal activities that
○ Training extend well beyond those
● Commanding: direct supervision of employees, and prescribed by the formal
motivating their efforts toward a common objective. organizational structure.
● Coordinating: identifying, arranging, and scheduling
all activities carried out by subordinates. This Line/Staff ● The black-and-white theoretical
coordination allows for the collective Functions distinction between line and staff
accomplishment of plans. functions is not always clear in
● Controlling: constant supervision of activities to practice.
identify accomplishments or goals and objectives. ● The neoclassicists illustrated that
Derivation from the identified plan allows the many staff functions are critical
manager to take corrective action. to the organization's success, so
the value of the distinction
between line and staff is not as
NEOCLASSICAL/HUMANISTIC THEORY
great as originally proposed.
● A theory developed in the 1950s that described
psychological or behavioral issues associated with Span of ● Determining a satisfactory span
organizations. Control of control seems far more
● The primary contribution of neoclassical theory was complex than picking a number.
to reveal that the principles proposed by classical ● The neoclassicists noted it
theory were not as universally applicable and simple depends on such issues as the
as originally formulated. supervisor’s managerial ability
○ The neoclassicists drew heavily on behavioral and the intensity of the needed
research that revealed the importance of supervision.
individual differences.

THEORY X AND THEORY Y

CRITICISMS MADE BY NEOCLASSICISTS TOWARDS THE
FOUR STRUCTURAL PRINCIPLES OF THE CLASSICAL ● D.M. McGregor argued that managers’ beliefs and
THEORY assumptions about their employees determine how
they behave toward those employees.
Division of ● The neoclassicists noted that ○ Managers’ behaviors affect employees’
Labor while division of labor causes attitudes and behaviors, which in turn affect
functional interdependence managers’ attitudes, beliefs, and behaviors.

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INDUSTRIAL-ORGANIZATIONAL PSYCHOLOGY
○ Self-fulfilling Prophecy: employees, over time, directly related to group pressure and
learn to act and believe in ways consistent with acceptance.
how managers think they act and believe — ● Hawthorne Effect: the tendency of individuals to
even if this wasn’t the case initially. perform better simply because of being singled out
and made to feel important.
○ It emphasized the psychological characteristics
THEORY X
of workers and managers, stressing the
1. Management is responsible for the economic significance of factors such as morals,
well-being of the organization. attitudes, values, and humane treatment of
2. Management of employees requires directing, workers.
controlling, motivating, and modifying their
behavior to fit the needs of the organization. OPEN-SYSTEMS THEORY
3. Without active intervention by management,
employees would be passive and resistant to ● The three key elements of open-system theory are
organizational change. inputs, throughputs, and outputs.
4. The average employee is lazy, works as little as ● Organizations thrive only as long as there is a
possible, lacks ambition, and dislikes continuous flow of energy from the external
responsibility. environment into the system and a continuous
5. The average employee is self-centered, indifferent export of products out of the system.
to organizational needs, and by nature, resistant
to change.
6. The average employee is gullible and not very
bright.

THEORY Y

1. Management is responsible for the economic

well-being of the organization.
2. Employees have become passive and resistant
only as a result of their experience in CHARACTERISTICS OF OPEN SYSTEMS
organizations.
Importation of Energy is brought in from the
3. Motivation, potential for development, capacity for
Energy external environment for use by
assuming responsibility, and readiness to work
the system.
toward organizational goals are inherent in
employees.
Throughput The energy is transformed.
4. It is the management’s job to allow employees to
recognize and develop the characteristics listed Output A product or service is exported.
above.
5. The chief job of management is to arrange Systems as Cycles The pattern of importation of
organizational conditions so that employees can energy and exportation of
achieve their own goals by directing their own products and services continues.
efforts.
Negative Entropy The tendency of all systems to
move eventually toward death is
HAWTHORNE STUDIES reversed.

● Western Electric Hawthorne Works was conducted

Information Input Information input and negative
from 1927 to 1932 under the leadership of
and Negative feedback allow the system to
psychologist and sociologist, Elton Mayo.
Feedback current or adjust its course.
○ This is what we know now as Hawthorne
Studies. Steady State Surviving open systems are
■ The initial experiment revealed that characterized by a balance in
illumination intensity did not relate directly energy exchange.
to worker productivity, while follow-up
experiments showed that productivity is
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INDUSTRIAL-ORGANIZATIONAL PSYCHOLOGY

Differentiation Open systems move toward

more specialized functions.

Integration and Bringing the system together as

Coordination a unified process is necessary for
the system to continue.

Equifinality There are many ways within the

system to get to the same
conclusion or end point.

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